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Bull Flattening As Growth Fears Abound

  • Yesterday’s twist flattening in cash Tsys on stronger-than-expected CPI inflation has been replaced by an outright bull flattening this morning, with largest gains in 5-10Y tenors on growth concerns.
  • Some of the rally in the front-end has been unwound on Beijing denying lockdown rumours as it boosts testing in the city (fears of further exacerbating inflationary pressures) but Tsys are still firmly higher on the day.
  • In yield space, 2YY -5.7bps at 2.580%, 5YY -8.5bps at 2.811%, 10YY -8.1bps at 2.833%, 30YY -6.7bps at 2.978%.
  • TYM2 is 16+ ticks higher at 119-25 on strong volumes. It’s just off a session high of 119-30 as it nears initial resistance at 120-01 (Apr 28 high) after which it could open 120-18+ (Apr 27 high).
  • Data: PPI inflation for April and weekly jobless claims at 0830ET
  • Bill issuance: US Tsy $35B 4W, $30B 8W auctions (1130ET)
  • Bond issuance: US Tsy $22B 30Y Bond auction (912810TG3) (1300ET)

US 2s10s flatten back towards previous sustained levels in the 20-25bp regionSource: Bloomberg

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